What should I ask about catering contracts when buying a restaurant?
Ask for every signed catering agreement and booking, check whether each can be assigned to a new owner, and find out which events are already paid for. Then see how much catering revenue depends on one client or one person the seller knows personally.
Gather the paperwork first: signed contracts, quotes, deposits taken, and a calendar of booked events. A contract that is only a friendly email is a weaker thing to rely on than a written agreement, so ask what the seller actually has. Check whether the contract names the restaurant, the owner or a separate company, because that decides whether it can move to you.
Look at what the restaurant owes. Deposits for future events are money the seller has already received, so ask how they will be handled at closing. Ask about commitments that stretch ahead, such as recurring weekly orders, and whether the pricing in them still makes sense under current costs.
Then ask about the people. If most catering comes from the owner’s own contacts, the work may leave when the owner does. Ask the seller to introduce you to the main clients, and consider asking for a transition period. Your lawyer can read the contracts and the assignment clauses, and your accountant can check whether catering profit is separated in the books.
Key takeaways
- Collect all signed catering contracts, quotes, deposits and the event calendar.
- Check whether each contract can be assigned to you, and who holds client deposits.
- Find out how much catering depends on the owner’s personal relationships, and ask for introductions.
Related reading
14 pages on the same subject, grouped by topic.
Buying
- Expert answerHow do I transfer a food premises licence when buying a restaurant?
- Expert answerWhat should I check about the drive-thru before buying a fast food restaurant?
- Expert answerWhat changes when you buy a food court restaurant instead of a street-front one?
- GuideBuying a full-service restaurant in Canada
- GuideBuying a quick-service restaurant in Canada
Due diligence
Selling
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentMajor pitfalls to avoid when negotiating a purchase agreement
- 03Business Development Bank of CanadaGovernmentUnderstanding post-merger operational integration
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